Pooh to copyright wrongs

John Quiggin
Australian Financial Review

1 March 2007

The news that the Disney corporation has lost a court action over the rights to Winnie-the-Pooh might seem, at first, to belong in the entertainment pages But the dispute over Winnie-the-Pooh involves real money, with the victorious Stephen Slesinger corporation planning to sue Disney for $2 billion.

But even this massive sum understates the importance of the points at issue here. It is no exaggeration to say that Winnie-the-Pooh, along with his Disney costar Mickey Mouse, drives copyright policy in the US, and therefore the rest of the world, including Australia.

The term of copyright in the United States is extended whenever Mickey is about to enter the public domain. Last time this event threatened to occur was in 2000 (under an earlier extension in 1976). In 1998, Congress dutifully passed the Sonny Bono Copyright Term Extension Act, derisively known as the Mickey Mouse Protection Act.

The Sonny Bono Act was regarded by almost every serious analyst of intellectual property as a policy disaster. A constitutional challenge to the Act was supported by a ‘friend of the court’ brief submitted by leading economists from across the political spectrum, including Nobel Prize winners George A. Akerlof, Kenneth J. Arrow, James M. Buchanan, Ronald H. Coase, L and Milton Friedman. But, as usual, Mickey prevailed.

While Mickey has attracted most public attention, Winnie is, if anything even more valuable, and there has been plenty of legislative effort to protect this value. In the recent case, Disney tried to use additional provisions of the Sonny Bono Act to recapture rights sold by AA Milne back in 1930.

Winnie benefited even more directly from the US-Australia Free Trade Agreement. Until this deal was pushed through, Australia had a copyright regime that was liberal by global standards, with works entering the public domain only(!) fifty years after the author’s death. In Winnie’s case, that would have happened in 2006. Thanks to the FTA, signed in 2004, Australia was required to extend its term to 70 years.

Under free market conditions, ideas cannot be appropriated since their use by one person doesn’t reduce their availability to anyone else, including the person who came up with the idea. Once an idea has been generated, this is a socially optimal arrangement. However, it does not give an incentive to writers and inventors to come up with new ideas.

For this reason, governments have sought a compromise, allowing creators of new ideas a limited period of monopoly (initially up to 14 years) within which they can capture the benefits of their new idea before making it freely available to all.

In most cases, 14 years was quite enough to make the author of a bestseller as wealthy as they were likely to become. No-one now would pay a premium to read a 1993 bestseller like The Bridges of Madison County. The same will doubtless be true of The Da Vinci Code 14 years from now.

However, a few items like Mickie and Winnie retained their value even after their creators had been rewarded many times over and, in many cases, the rights had been acquired by others. At this point, the inexorable logic of rent-seeking kicked in. By granting a monopoly, governments had created a powerful interest group, ready to defend itself by all means available. As they saw their monopoly about to expire, they successfully lobbied for one extension over another.

If the only consequence of these monopolies was a distortion in the market for cartoonbs and anthropomorphised cuddly toys, this would not be a huge problem. But unlimited copyright is far more pernicious than this.

The vast majority of works created 50 or 100 years ago have no commercial value, and no-one bothers to claim them. But they are still in copyright and inaccessible to anyone who might want to use them as the basis of new work. If intellectual property monopolies continue to grow, the whole process of innovation that has driven economic growth and cultural progress is at risk.

As was recognised by the US Founding Fathers, and by generations of economists since, there is room for a reasonable compromise. A return to the original fourteen years is probably beyond reach, but surely copyright could be confined to the life of the author. The latest extensions of copyright have produced a system so lopsided that we would be better off scrapping the entire monopoly system and relying on the ingenuity of the free market to reward authors.

John Quiggin is an Australian Research Council
Federation Fellow in Economics and Political Science at the University of Queensland.